Rejecting Tuition Payment Clawback: A Logical Result

By James Bentley (October 20, 2017, 5:37 PM EDT) -- When the parent of a child who attends private school files for bankruptcy, the school may be sued to return tuition payments for the benefit of the parent's creditors. Recently, a bankruptcy court dismissed with prejudice two complaints alleging that tuition payments made before a parent's bankruptcy are fraudulent transfers and should be "clawed back."[1] In dismissing these complaints, the court relied upon case law holding that a parent and his or her children must be considered a "single economic unit," and thus tuition payments made to private schools (even while the parent is insolvent) cannot be recovered. The court also held that the tuition payments do not unjustly enrich the schools at other creditors' expense because the parent receives the same benefit as his or her children.[2]...

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